Session 50 OF, Provider Payment Reform: Using Benchmarks as a Foundation for the 

Future  

Moderator: Gregory G. Fann, FSA, MAAA 

 Presenters: 

Joan C. Barrett, FSA, MAAA Zachary Miller Davis, FSA, MAAA Courtney R. White, FSA, MAAA 

     

SOA Antitrust Disclaimer SOA Presentation Disclaimer 

ProviderProviderProviderProvider PaymentPaymentPaymentPayment ReformReformReformReform:::: UsingUsingUsingUsing BenchmarksBenchmarksBenchmarksBenchmarks asasasas aaaa

FoundationFoundationFoundationFoundation forforforfor thethethethe FutureFutureFutureFuture

Zach Davis FSA, MAAA

Courtney White FSA, MAAA

Joan Barrett FSA, MAAA

October 24, 2016

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2

Presentation Disclaimer

Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Society of Actuaries, its cosponsors or its committees. The Society of Actuaries does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. Attendees should note that the sessions are audio-recorded and may be published in various media, including print, audio and video formats without further notice.

3

Overview – Provider Benchmarking

Why do we need benchmarking

Introduction to benchmarking

Access to data

Provider Benchmarking From The Stakeholder’s Point of View

Case study

4

Why Now?

5

CMS Initiatives

• Vision: Transform HealthVision: Transform HealthVision: Transform HealthVision: Transform Health

• Overall goalsOverall goalsOverall goalsOverall goals• Better care

• Smarter spending

• Healthier people

• Primary focusPrimary focusPrimary focusPrimary focus• Incentives

• Care delivery

• Information sharing

• Specific targetsSpecific targetsSpecific targetsSpecific targets• CMS Managed Care Categories

• Category 1—fee-for-service with no link of payment to quality

• Category 2—fee-for-service with a link of payment to quality

• Category 3—alternative payment models built on fee-for-service architecture

• Category 4—population-based payment

• 85% of fee-for-service payments are tied to quality or value by 2016 and 90% by 2018 (Category 2-4)

• 30% of Medicare payments are tied to quality or value through alternative payment models by the end of 2016 and 50% by 2018 (Category 3-4)

6

MACRA Overview

• Bipartisan legislation Bipartisan legislation Bipartisan legislation Bipartisan legislation • Signed into law on April 16, 2015

• Final Rule October 2016

• https://qpp.cms.gov

• Repealed the sustainable growth rate (SGR) formulaRepealed the sustainable growth rate (SGR) formulaRepealed the sustainable growth rate (SGR) formulaRepealed the sustainable growth rate (SGR) formula• Enacted as part of Balanced Budget Act of 1997

• Limited physician fee increases to keep the Medicare spending per beneficiary to the increase in GDP

• Annual “doc fixes”

• Introduced two payment tracks for physiciansIntroduced two payment tracks for physiciansIntroduced two payment tracks for physiciansIntroduced two payment tracks for physicians

• Alternate Payment Model incentives

• Merit-Based Incentive Payment System (MIPS) which links fee-for-service payments to quality and value

• Streamlines Streamlines Streamlines Streamlines several existing quality and value programs under MIPSseveral existing quality and value programs under MIPSseveral existing quality and value programs under MIPSseveral existing quality and value programs under MIPS

• Physician Quality Reporting Program

• Value-based Payment modifier

• Medicare electronic health records (EHR) Incentive programs

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Introduction to Benchmarking

8

Degree of Healthcare ManagementLo

ose

ly m

an

age

d • Limited evidence based best practices

• Minimal incentives to manage care

• Limited use of low cost alternatives

• Some inpatient reviewW

ell

Ma

na

ged • Best practices

• Provider incentives

• Low cost alternatives

• Higher consumer awareness

9

Comparisons to Benchmark Population

Service CategoryService CategoryService CategoryService Category

Plan PBPM Plan PBPM Plan PBPM Plan PBPM

ExpendituresExpendituresExpendituresExpenditures

Well Managed Well Managed Well Managed Well Managed

PBPM ExpendituresPBPM ExpendituresPBPM ExpendituresPBPM Expenditures

Savings Savings Savings Savings

OpportunityOpportunityOpportunityOpportunity PBPMPBPMPBPMPBPM

Savings as % of Savings as % of Savings as % of Savings as % of

Service CategoryService CategoryService CategoryService Category

Savings as % of Savings as % of Savings as % of Savings as % of

Total ExpendituresTotal ExpendituresTotal ExpendituresTotal Expenditures

Inpatient Medical $ 129 $ 100 $ 28 22% 3.7%

Inpatient SurgicalInpatient SurgicalInpatient SurgicalInpatient Surgical $ 144 $ 106 $ 38 26% 5.0%

SkilledSkilledSkilledSkilled Nursing FacilityNursing FacilityNursing FacilityNursing Facility $ 105 $ 36 $ 68 65% 8.9%

All OtherAll OtherAll OtherAll Other InpatientInpatientInpatientInpatient $ 2 $ 1 $ 0 17% 0.0%

Inpatient Total $ 379 $ 244 $ 135 36% 17.6%

Loosely Managed

Benchmark

Well Managed

BenchmarkTotal Expenditures

$770 $251 PBPM (33%) $519$778 $770

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Benchmarking – Treatment ChoicesAdmissions for Preference Sensitive Conditions

Reduction in admit

rate

Cost per Admit

Financial Savings

Population Health – Data-Driven Performance Improvement

ExampleExampleExampleExample OpportunitiesOpportunitiesOpportunitiesOpportunities

ActionableActionableActionableActionable

OutcomeOutcomeOutcomeOutcome

Minimize Diabetes –

Related

Complications

Reduce Post-

Surgical Costs

Reduce Price

Variation of Elective

MRIs

SampleSampleSampleSample

InterventionsInterventionsInterventionsInterventions

Set up diabetes

registry with triggers

for outreach for

patients whose status

is unknown

Document

patient’s recovery

plan and assist

with identifying

and arranging

most appropriate

option

Require approval for

MRI and provide

pricing information

for provider as well as

prices at alternative

providers

LeadingLeadingLeadingLeading

IndicatorsIndicatorsIndicatorsIndicators

• % of patients with

recommended visit

frequencies

• % of patients

reporting

biometrics at

requested intervals

• % of patients

with

documented

recovery plan at

time of surgery

• % of patients

planning to

recover at home

• % of patients

receiving pricing

information

• % of patients

changing provider

choice

1. Benchmark Outcome

Performance

2. ID and Implement

Interventions

3. ID Leading Indicators

4. Monitor Leading

Indicators

5. Tweak Interventions

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Benchmarking Math

• Identify metrics that can be impacted by available interventions

• Benchmark provider performance vs. a range of provider performance rather just average performance

Utilization

Admissions for Preference-

Sensitive Conditions

ER for Non-Emergent Conditions

Poor Treatment Quality

Unit Price

Hi-Tech Radiology

High-Volume Surgeries

Pharmacy

Reducing Per Capita Cost of Care

GeneralGeneralGeneralGeneral ModelModelModelModel

Metric

Provider ABC

Performance

Savings from

Reaching

Benchmark

Savings from

Reaching

Median

Metric A

Metric B

Reduction in Utilization

Rate to Benchmark

Cost per Service

Financial Savings

13

Benchmarking – Chronic-Condition Management Care Gap Reports

• Opportunity

• Improve compliance with recommended preventive

services especially for members with chronic conditions

• Source of metrics is HEDIS, National Quality Foundation

and other leading quality organization

• Most Condition Management Vendors maintain that

reducing care gap rate is main driver of utilization

improvement

• Potential Interventions:

• Use physician office staff to do tracking and outreach

rather than outside vendor

• Consider incentives for treatment compliance

Partial List of Available Metrics

MEASURE CATEGORY MEASURE DESCRIPTION

Cardiovascular

Conditions

The percentage of members 18-75 with cardiovascular

conditions who had a LDL-C screening during the measurement

year.

Cardiovascular

Conditions

The percentage of members 18 and older during the

measurement year who were hospitalized from July 1 of the prior

year to June 30 of the measurement year with a diagnosis of AMI

and who received persistent beta-blocker treatment for six

months after discharge.

Diabetes

The percentage of members 18-75 years of age with diabetes

(type 1 and type 2) who had a HBA1c test performed during the

measurement year.

Diabetes

The percentage of members 18-75 years of age with diabetes

(type 1 and type 2) who had a LDLC test performed during the

measurement year.

Medication ManagementThe percentage of adults 18-75 with CHF and LVSD who received

ACE or ARB drugs in the measurement year

Musculoskeletal

Conditions

The percentage of adults 18-50 with a primary diagnosis of low

back pain who did not have an imaging study within 28 days of

diagnosis

65%

85%

75%

94%

0% 20% 40% 60% 80% 100%

Cholesterol Lowering

Medication for Patients

with CAD

Diabetes with Annual Hba1c

HEDIS 90th Percentile

Provider A

Example – Knee Replacement Bundle

$8,400

$6,200

$2,400

$2,200

$1,200

$1,000

$6,000

$2,000

$1,000

$2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Fee For Service Well Managed

Home Health

Post Acute Care

Anesthesiologist

Surgeon

Facility

Total: $13,400

Target Price: $17,000

Total: $19,000

15

Access to Data

16

Available Data Sets

• CMS 5% sample files• Medicare population

• Wide range of data sets

• Available for a nominal fee

• Truven Health Analytics – Marketscan Database• Multiple populations

• 230 million unique patients since 2015*

• Milliman Health Cost Guidelines (“HCGs”)• Both commercial and Medicare Populations

• Other

*http://truvenhealth.com/markets/life-sciences/products/data-tools/marketscan-databases

17

Provider Benchmarking From The Stakeholder’s Point of View

18

Overview

• The StakeholdersThe StakeholdersThe StakeholdersThe Stakeholders• Consumers/Patients• Employers• Health Plans• CMS• Providers

• Key QuestionsKey QuestionsKey QuestionsKey Questions• What do they want to know?• What do they need to know?

• Types of information• Possible misinterpretations

• Analytics/Strategies• Communications

19

Consumer Attitudes on Providers

• Primary carePrimary carePrimary carePrimary care• Prioritize convenience and continuity over credentials

• Manners beat credentials

• Medical errors/missteps top reason consumers leave PCP, not competition

• SpecialistsSpecialistsSpecialistsSpecialists• Affiliation matters for some specialties (oncology but not

dermatology)

• Distance still important

• HospitalsHospitalsHospitalsHospitals• Rely on doctor’s recommendation

• Distance, neighborhood still important

20

Consumer Attitudes on Cost and Quality

• QualityQualityQualityQuality• Consumers not convinced high prices mean high quality

• More likely to assume low costs mean low quality

• CostsCostsCostsCosts• Costs mean out-of-pocket costs

• More aware recently of rising costs in general but not sure why and what to do about it

• More consumers are questioning doctor’s recommendations and avoiding care

• Want to be smarter consumers

21

Consumer Communications

• Receiving informationReceiving informationReceiving informationReceiving information• Provider directories/Physician Compare (CMS)

• Distance• Quality indicator/Awards (no details)• Credentials, new patients, languages, etc

• Hospital Compare (CMS)• More details about quality, patient experience, etc

• Treatment cost estimators

• Providing informationProviding informationProviding informationProviding information• Surveys• Complaints• On-line (Yelp, HealthGrades, etc)• Word of mouth

22

Employer Priorities

• Are my employees happy?Are my employees happy?Are my employees happy?Are my employees happy?• Network access, geographical, by specialty

• Employee experience

• Are my employees getting the care they need?Are my employees getting the care they need?Are my employees getting the care they need?Are my employees getting the care they need?• Mammograms, diabetes testing, etc.

• Is the price right?Is the price right?Is the price right?Is the price right?• How much is Aetna paying providers compared to

Anthem, United, etc?

• More generally, are employees taking ownership of More generally, are employees taking ownership of More generally, are employees taking ownership of More generally, are employees taking ownership of their health?their health?their health?their health?

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Employer: Information Received

• Employee feedbackEmployee feedbackEmployee feedbackEmployee feedback

• Vendor reportingVendor reportingVendor reportingVendor reporting• Claims, financial experience

• Access reports

• Satisfaction surveys

• Net quality measures

• Network ExperienceNetwork ExperienceNetwork ExperienceNetwork Experience• Uniform Discount Submission

• Total Cost of Care

24

Health Plan Priorities

• Are consumers happy and getting the care they Are consumers happy and getting the care they Are consumers happy and getting the care they Are consumers happy and getting the care they need?need?need?need?

• Are employers happy?Are employers happy?Are employers happy?Are employers happy?

• CostsCostsCostsCosts• CompetitivenessCompetitivenessCompetitivenessCompetitiveness

• PredictabilityPredictabilityPredictabilityPredictability

• Which measures really matter?Which measures really matter?Which measures really matter?Which measures really matter?• EfficiencyEfficiencyEfficiencyEfficiency

• SavingsSavingsSavingsSavings

25

Health Plans: Evaluating Efficiency

• Episode approachEpisode approachEpisode approachEpisode approach• Each episode a provider is responsible for is compared to the

market average for that episode

• Weighted average of scores determine overall rank, establish efficiency indicator

• Measures actual care delivered, not necessarily what care was optimal

• Risk adjustment approachRisk adjustment approachRisk adjustment approachRisk adjustment approach• Divide by risk score or weighted average

• Measures overall costs

• Risk scores are less accurate measure for high cost claimants

• New patients, no claims

26

Health Plans: Evaluating Savings (Controlled Comparisons)• Controls Controls Controls Controls

• Age-sex or risk

• Area

• Plan design

• ComparisonsComparisonsComparisonsComparisons• Clinical trials

• Historical trends

• Pre-treatment vs. post-treatment

• Participant/Non-participant

• Confounder: Reversion to the meanConfounder: Reversion to the meanConfounder: Reversion to the meanConfounder: Reversion to the mean

27

Health Plans: Will Potential Savings Be Realized?

28

Typical Savings TimelineTypical Savings TimelineTypical Savings TimelineTypical Savings Timeline

BaselineBaselineBaselineBaseline

InvestmentInvestmentInvestmentInvestment SavingsSavingsSavingsSavings

CMS: Composite Performance Score

Component (Basis)Component (Basis)Component (Basis)Component (Basis)

WeightWeightWeightWeight

2019201920192019

WeightWeightWeightWeight

2021+2021+2021+2021+ CommentsCommentsCommentsComments

Quality (Decile) 50% 30% • Patient outcomes

• Patient safety

• Patient experience

• Care coordination

Resource use (Decile) 10% 30% • Cost related

Clinical Practice

Improvement (Absolute)

15% 15% • Integrated behavioral and

mental health

• Beneficiary engagement

Advancing Care

Information (Absolute)

25% 25% • EHR use

• Health Information Exchange

• Electronic prescribing

29

Physician Priorities and Strategies

• PrioritiesPrioritiesPrioritiesPriorities• Income

• Level

• Predictability

• Minimize administrative duties• Time/money involved in oversight

• Want to spend more time practicing medicine

• StrategiesStrategiesStrategiesStrategies• Mergers/hospital systems

• Choice of measures

• Financial planning

• Cost-shifting

30

Health Plans: Cost-Shifting

31

Hospital Priorities and Strategies

• PrioritiesPrioritiesPrioritiesPriorities• Income

• Triple Aim• Improve patient experience

• Improve population health

• Reduce the per capita cost of care

• Strategies and analyticsStrategies and analyticsStrategies and analyticsStrategies and analytics• Process improvements

• Destination programs

• Emphasis on outpatient

• Financial projections

32

Parting Thoughts

• MACRA can be transformationalMACRA can be transformationalMACRA can be transformationalMACRA can be transformational• Clinical practice

• Reimbursement

• Expect trend volatilityExpect trend volatilityExpect trend volatilityExpect trend volatility

• Pay attention Pay attention Pay attention Pay attention –––– things are changing rapidlythings are changing rapidlythings are changing rapidlythings are changing rapidly

• New opportunities for actuariesNew opportunities for actuariesNew opportunities for actuariesNew opportunities for actuaries

33

Case Study

34

Case Study 1 – Medicare Advantage Capitation• Joint venture between hospital and medical group

• Carrier proposed partial risk deal with transition to full risk

• Partial risk deal terms:• 50% of upside risk on Part A and Part D services• Share 50%/50% on Part B services

• Full risk deal terms:• 50% of upside risk on Part D services• 100% of upside risk on out-of-area emergencies• 100% at-risk for Part A and Part B services

• Full risk membership threshold

• Division of Financial Responsibility (DOFR)

35

• Approach

1. Build actuarial cost model for service area

• 0.95 risk score per the contract (all differences attributed to

morbidity)

• Limited managed care efficiency (loosely managed)

• 100% of Medicare fee-for-service reimbursement

2. Test sensitivity to risk score assumption

3. Test sensitivity to managed care efficiency

Case Study 1 – Medicare Advantage Capitation

36

Case Study 1 – Medicare Advantage Capitation• Other considerations

• Medicare Advantage education

• Bidding basics

• Risk scores

• Part D

• Star rating (impact on percent of premium deals)

• Contract terms

• Actuaries, not attorneys

• Attribution

• Benefit design

• Identify favorable and unfavorable risk terms (i.e., reconciliation

process)

• Benchmark contract terms

37

Case Study 1 – Medicare Advantage Capitation

ExhibitsExhibitsExhibitsExhibits

38

Case Study 2 – Medicare Shared Savings Program• Clinic

• Selected by CMS as Accountable Care Organization (ACO) under Medicare

Shared Savings Program (MSSP)

• CMS provided prior year data

• Need baseline to measure potential savings and opportunities for program

39

Case Study 2 – Medicare Shared Savings Program• Key Issues

• Identify starting point

• Leakage

• Lack of benchmarks for subpopulations

• Data

• Claim and Claim Line Feed (CCLF) files

• No substance abuse costs due to HIPAAc

• No risk scores

• No decedents

• No member months or exposure file (based on patients)

40

Case Study 2 – Medicare Shared Savings Program

ExhibitsExhibitsExhibitsExhibits

41